On Farmland Finance for the Next Generation of Farmers

I just stumbled upon an opinion piece by Adam Calo in the San Francisco Chronicle from several months back, which describes the crisis of farmland access and ownership facing beginning farmers. It very poignantly calls on farmers and eaters to engage in policy, specifically around farmland ownership and lack of access to farmland on reasonable lease terms for beginning farmers.

Calo compares the farmland access crisis to the urban housing crisis: "A plethora of small-farm training workshops, incubators, training organizations, and federal funding mechanisms provide technical assistance for farmers in the hope that new competencies will bring agricultural success. In a renter’s world, this simply is not enough. It would be like offering a tenant with a broken heater a course on appliance maintenance instead of challenging the landlord to uphold their rental contract and make the repair."

At the Sustainable Economies Law Center, we’ve been thinking along similar lines. A more just food system is inherently intertwined with a more just system of land distribution and ownership. We've been thinking about how to enable beginning farmers to become not just farm business owners, but also farmland owners. This raises lots of questions around finance of course, because beginning farmers need some pretty significant financial resources to buy land. Where will all that money come from?

Here's one idea. There are trillions of dollars in American's retirement savings and other long term savings accounts. We’ve been approached by middle class investors who have their retirement savings invested in Wall Street, but would prefer to invest in their local economy. Many of these investors would be willing to take a smaller return on investment and less liquidity if their investment dollars were financing more just and sustainable food systems. For this reason, Slow Money networks, Local Investing Opportunity Networks, and other similar groups have sprung up around the US to bring together small food and farm enterprise owners and potential investors to build relationships (some of these groups are not just focused on food and agriculture, but rather small, local businesses generally). Sometimes investment deals come out of these relationships. One thing to note about Slow Money is that it's slow. These investment deals don't happen fast because both the farmer or food producer and the investor put considerable time into each relationship before the first check is signed. This is partly due to securities laws which make it burdensome to invest unless investors are very wealthy or have a substantial personal relationship with the entrepreneur. And its partly due to the red tape around self-directed retirement savings accounts, where many ordinary Americans keep their long term savings. We think it’s time to reduce some of these legal barriers and enable more direct investors-to-farmer deals to happen.

Another idea: what if ordinary savers could place a chunk of their retirement savings in a loan fund that would invest in many different sustainable and local farm enterprises? Loan fund investors could diversify their portfolio without needing to spend countless hours getting to know dozens of farmers and analyzing investment opportunities for each one, although there are many great reasons to get to know some farmers at least a little.

And what if there was a loan fund for farmland access for beginning farmers that was large enough to sustain investors putting money in and taking it out as their needs evolved? Retirees could withdraw their funds as younger investors begin to invest in the farmland access fund to save for their own retirement.

These are just some ideas we've been brainstorming as we've been taking a deeper dive into our grassroots finance work this year. Some of this work is already happening through loosely organized community groups, as well as nonprofit loan funds like RSF Social Finance, Northern California Community Loan Fund, California FarmLink, and others. We aim to uplift successful models, to develop more legal resources, and to serve new clients in ways that will help unlock some of the trillions of dollars that are invested in Wall Street. It's time to bring those dollars back into our local economy. And in that way we hope to support a new generation of more diverse, ecologically-minded, community-supported farmers.